A company is considering purchasing a new machine, at a cost of $50,000. This amount will be written off over 5 years at $10,000 per year. In the first year the company will have to increase its accounts receivable by $4,000, and inventory by $8,000. The disposal value of the machine being replaced is $1,500 and will be used to offset the amount borrowed for the new machine. What is the initial working capital investment required for the purpose of capital budgeting?

A.

$10,500

B.

$4,000

C.

$8,000

D.

$12,000

E.

$60,500

Which of the following is NOT a factor that managers should consider in deciding how to allocate resources across customers?

A.increases in overall demand from having

wellknown

customers

B.

customer retention likelihood

C.

shortrun

and

longrun

customer profitability

D.

customer growth potential

E.

economic forecasts

The following table presents the flow of production in units. Assume that there are 5,000 total spoiled units at each stage of completion and that the normal spoilage rate is 3% of good units passing the inspection point.

Physical Units

Inspection at Stage of Completion

at 15% at 40% at 100%

Workinprocess

beginning (20% complete) 10,000 10,000 10,000

Started during the month 55.000 55,000 55,000

To account for 65,000 65,000 65,000

Good units completed and transferred 58,000 58,000 58,000

Normal spoilage ? ? ?

Abnormal spoilage ? ? ?

Workinprocess

ending inventory (30% complete) 3,000 3,000 3,000

To account for 65,000 65,000 65,000

What is the number of abnormal spoiled units recognized at the 100% stage of completion?

A.

3,350

B.

3,260

C.

3,050

D.

3,200

E.

3,500